Oil giant Aban offshore requests SBI and PNB for moratorium on short term loans
By Vaibhav Aggarwal
Mar 4, 2010
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The biggest Indian oil company, Aban offshore is facing troubles for having incurred huge debt. The company is thus trying to negotiate with State Bank of India and Punjab National Bank for receiving a moratorium on short term loans. The company has approached the banks after it failed to refinance a Rs. 200 crore bullet loan which was due last month, a banker said.

Aban had started as a small engineering firm in Chennai in 1986. Aban Offshore Limited (AOL) was born in 1986 when Oil and Natural Gas Corporation Ltd. (ONGC) encourages the set up and development of offshore drilling services to the to meet the growing needs of a vibrant economy.

The company already has a loan of more than Rs 16,000 crore piled up which it took during its acquisition of Norway's Sinvest in 2006. To add to this figure, it has yet another $335 million (Rs 1,535 crore) of loans coming due by the end of this month, said the banker.

Rating agency, Care ratings had lowered ratings on many of the company's notes last month including short-term bank facilities of Rs 400 crore. The long term loans of the company have been rated as double B by the agency, thus alerting a huge credit risk.

"The ratings revision primarily factors in the inability of AOL to successfully refinance its bullet loans in a timely manner," Care Ratings said.

Commenting on the status of the company, Sunil Shah, director (equities) at Indsec Securities said, "The stock price had recovered from the bottom because at that time the bullet debt was provided to the company from local PSU banks. If the company is defaulting on that as well, it won't be a good thing for the company's future because they have a huge debt exceeding $3 billion to be serviced."

Aban had acquired the Norwegian company at the time of boom but the recession left many of its rigs jobless and also raised difficulties for the company to cater to its loans.

Referring to the bullet loans the banker said, "I wouldn't be surprised, if the company manages to repay."

The company has agreed to pay an interest of Rs 1,600 crore per annum to its bankers.


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